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Pick n Pay: Round two

The Investment Week

Shop Talk: SA's e-commerce playing catch up

Mentioned in this Article

FM Edition:

Heaven help us. Stikeez, the collectable promo peddled by Pick n Pay that so effectively brought out the hustler in little (and big) kids alike, is back.

Collectable campaigns, like loyalty schemes and "hint of desperation" discounts (like BOGO — buy one, get one free — and AYCE — all you can eat) fall within the auspices of marketing techniques aimed at creating "stickiness" or repurchase behaviour between consumer and brand.

They get feet in the door.

Last week I had a chat with a retail boss, who told me that the level of promotion in the SA market at the moment is unprecedented.

"Guys will do anything," he said.

And can we blame them? Annual growth in retail sales fell to 0.2% in August — that’s the weakest growth rate since June 2014.

A song comes to mind. It goes something like this: "Um boom ba bay / Um boom ba bay / Um boom boom ba ba bay / Pressure, pushing down on me / Pressing down on you ..."

Retailers have been cranking up their promotional hype machines because consumer spending growth is so subdued. High levels of inflation are eroding household purchasing power, confidence is weak, the cost of servicing debt is high (lending institutions aren’t exactly dishing out credit either) and income growth has also slowed.

The gloves have been off for a while now, particularly in the grocery space, as Woolworths, Pick n Pay, Spar and Shoprite duke it out for market share by investing in price (accepting lower margins to remain competitive).

Now, Pick n Pay has been at a disadvantage for a while. Remember, it’s a turnaround story — but while it was in, erm, a bad space, competitors used its weakness to ramp up store numbers and lure shoppers.

It was during this time that Woolworths set out to change perceptions of itself as a niche food retailer, with the launch of its supermarket strategy.

The result was that consumers became used to buying long-life milk and washing powder at Woolies rather than just double-thick cream and strawberries from Spain.

Shoprite, ever one to capitalise, went slightly upmarket, extending its ready-to-eat and wine ranges.

Oh. And don’t forget its cheese and champion boerewors adventures with Nataniël.

Pick n Pay is still playing catch-up, but its latest set of numbers shows that the business has clearly been stabilised and costs are down.

Where, before, there were just hints of momentum in its recovery, its selling price inflation shows that it’s in the ring.

Richard Brasher, former UK chief at Tesco, has turned out to be a good bet for Pick n Pay.

And the group now has another heavyweight: Paula Disberry, former group director of retail ops at Woolworths. She’s also ex-Tesco, ex-Colgate Palmolive and ex-BP.

I remember her saying at a retail conference: "The average customer is dead and average retailers will die with them."

At the back end — that’s distribution — Pick n Pay has its work cut out. Its rivals have been pumping money into supply chain for the better part of two decades. Pick n Pay’s current 12-month forward p:e ratio is 21.4. There was a derating in early October.

It’s far from a cheapie, but some might give it a second look now.